Legal Blog: Lawyers’ Issues

Lawyer’s Duty of Care: Court confirms that opposing counsel do not, generally, owe a duty of care to the opposing party

368230 Ontario Limited v. Feintuch Law 2018 Ont SCJ

Plaintiff mortgagee complained that the information he received from his lawyer as to the details of a mortgage transaction were incorrect and caused him to lend money that was no longer recoverable in whole. Plaintiff sued his own lawyer and the mortgagor’s lawyer, who had supplied the information. The judge struck the statement of claim against the mortgagor’s lawyer as disclosing no cause of action. A lawyer rarely has a duty of care to another party’s lawyer, particularly, as in this case, when the other party has its own lawyer and has never communicated directly with the opposite party’s lawyer.

Illegal Distraint Damages

On occasion, a case comes along that is filled with so many legal concepts that it is very difficult to distil them in the space allotted to us. One such case is 2105582 Ontario Ltd. (Performance Plus Golf Academy) v. 375445 Ontario Limited (Hydeway Golf Club), 2017 ONCA 980.

Fore

Landlord golf club leased to tenant, without a formal lease, land adjacent to the golf course for the use as a driving range. Tenant invested approximately $200,000 to construct the driving range and purchase the necessary equipment. The driving range went into operation around September 2006, but, one year later, tenant fell into arrears. Landlord terminated the lease as of December 6, 2007.

Stretch

We have opined that the smell of a case often informs the decision. Sometimes judges can find facts that allow them to apply the law and come to the result they prefer. Sometimes, they have to stretch the facts or the law or both. This judicial stretching was, in our view, apparent in Westwood Mall Holdings Limited v. Kapila 2017 ONSC 5478, a decision of the Ontario Superior Court of Justice.

Issue

“You’re not being fair” – a cry of children in the schoolyard. Now, it seems, it is the cry of a purchaser who does not receive a price reduction from a developer when the developer gave that reduction to other purchasers.

The purchaser sued for damages in Small Claims Court. What damages and how they were calculated, we do not know.

The plaintiff, by his own admission, was unhappy with his prospective purchase and had actively complained about the developer. He alleged at trial, without any evidence, that, because of his complaints, the developer did not give him the same break on the price as it did to others. The developer submitted no evidence to counter this allegation, taking the position that its actions regarding other purchasers were irrelevant to its obligations to the plaintiff under his agreement of purchase and sale. Such a novel argument.

I’ll Just Add it To Your Bill: Court Discusses Lease Damages, Mitigation, and Summary Judgment in Commercial Lease Dispute

A tenant does not pay rent. In the normal course, the landlord may work with the tenant if the cash flow problem is short-term, but, ultimately, if the tenant cannot meet its obligations, the landlord will take possession of the premises, re-let them, and look to the tenant for damages. What happens when the tenant does not pay rent as a power play to negotiate better terms and the landlord sits back, does nothing to take possession, and ultimately sues for arrears of rent? This unusual situation was dealt with in 7Marli Ltd. v. Pet Valu Canada Inc. (2017) 85 RPR (5^th) 112 (Ont SCJ).

Dispute

The parties had a 10 year lease with minimum rent at $20 a square foot for the first 5 years and $22 a square foot for the next 5 years. After factoring in additional rent, the tenant was liable to pay $9,500 per month in rent for the first 5 years. In 2013, two years into the term, the parties agreed that the tenant could pay a reduced minimum rent at $15 per square foot, resulting in a reduction of rent to $7,700 per month.

Drafting

The Supreme Court of Canada informed us in Creston Moly Corp v. Sattva Capital Corp (2014) that, in contract interpretation, the overriding concern is to determine the intent of the parties and the scope of their understanding, giving words their ordinary grammatical meaning consistent with the surrounding circumstances known to the parties at the time of the contract formation. That is all well and good, assuming that the contract is properly drafted. Unfortunately, we see many contracts, some drafted by laymen and some, unfortunately, drafted by lawyers, that are almost incomprehensible. Looking at the ordinary grammatical meaning of words does not help much when the contract drafter can barely put together a sentence. What does one do when a provision in a contract makes no sense? The judge in Mohamed v. Information Systems Architects Inc. 2017 ONSC 5708 had to answer that question.

Background

An employer hired an employee (who was classified as an independent contractor, but could just as easily have accepted employment as an employee) to work as an information technology consultant for the employer’s clients.

Before the parties entered into an agreement, the employee informed the employer that, 17 years ago when in high school, he had been convicted of assault with a weapon. This information did not dissuade the employer from giving the employee a 6-month, fixed term services agreement, with a particular client in mind. The employee consequently resigned from his previous full-time job.

Perfect Plus

On occasion, we read reasons for decision and have to shake our head. “Really?,” we say to ourselves. One such decision is that of the Ontario Court of Appeal in Meehan v. Good 2017 ONCA 103, a decision dealing with the duty of a lawyer to a client to give advice outside the lawyer’s retainer.

Retainer

Clients retained a lawyer (“new lawyer”) to assess the accounts of their former lawyer (“old lawyer”), who had acted for them on the settlement of their tort and accident benefits claims arising out of a motor vehicle accident. Presumably, the clients felt that they had paid old lawyer too much money.

New lawyer made it crystal clear that the clients retained him only for the assessment and not for a possible negligence action against old lawyer. New lawyer went even further than that. He advised the clients more than once to seek legal advice regarding the negligence issue. The clients admitted that they had received this advice. They had even signed an acknowledgment that they had received this advice.

Repudiation

As we have stated previously (see newsletters of October 1999 and February 2000), a party repudiates a contract when it evinces an intention not to be bound by it. The test is objective. Just as for fundamental breach, the court must ask whether the breach deprives the innocent party of substantially the whole benefit of the contract. A simple breach of contract is not necessarily a repudiation of the contract.

Contrary to the concept of rescission, repudiation requires the non-repudiating party to make an election. If that party treats the contract as being in full force and effect, the contract remains in force for both parties. If it accepts the repudiation, the contract is terminated and the non-repudiating party can sue for damages for failure to receive its benefits under the contract. This is exactly what a law firm’s client expected in Miller, Canfield, Paddock and Stone v. BDO Dunwoody LLP 2016 ONCA 281.

Retainer

The client and the law firm entered into a contingency agreement. Under the agreement, the firm agreed to act on behalf of the client “in any and all proceedings.” The agreement also contained a provision entitling the client to “cancel“ the firm’s services, with or without cause, but, in that case, was liable to pay the value of all services rendered to the termination. The agreement set out the methodology to value those services.

Tactics

At times, some parties are more interested in raising procedural hurdles than in having a matter tried on its merits. It would seem that the case of York Condo No. 890 v. Hendler 2017 ONSC 3420 is an example of that proposition.

Dispute

A lawyer acted for a condominium. He was a partner in a law firm and, under its name, rendered an account for his services to the condo. The condo did not pay the account and the law firm moved to assess it. So far, this is a garden variety fees dispute.

Instead of just dealing with the assessment, the condo went on the offensive. On the eve of the assessment, it commenced an action against the partner and the law firm claiming that they were negligent in dealing with the condo’s affairs. (i.e. they gave faulty advice).

Release (3)

We have previously discussed the importance of wording in releases (see August 2012, June 2006, and December 2002 newsletters). The decision in Biancaniello v. DMCT LLP 2017 ONCA 386 highlights how important it is.

Dispute

A client and an accounting firm had a dispute over fees and the services that the firm rendered, which included applying for research credits, negotiating the departure of an employee, and, most importantly, structuring a reorganisational “butterfly transaction.” The firm commenced an action for $67,000.00 for its fees. The client claimed that it obtained little value from the services and had incurred damages arising out of the firm’s advice. Before the client delivered a statement of defence, the parties settled the action by way of a payment from the client to the firm of $35,000. Since the client had alleged improper advice, the firm demanded and received a release before it agreed to take $32,000 less for its accounts than it had wanted to receive.

Molly Luu’s Canadian Lawyer Magazine Article

Molly’s article was recently featured in Canadian Lawyer Magazine. Click here to read: When your client sees red: In litigation, emotions often cloud a client’s judgment